A default does not strip you of your rights or make you a criminal. Banks have to follow process and give you time to repay dues before repossessing your assets to realise the arrears.

Typically, banks initiate such proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (Sarfaesi) Act. If the borrower’s account is classified as a non-performing asset (NPA), where repayment is overdue by 90 days, the lender has to first issue a 60-day notice to the defaulter.

“If the borrower fails to repay within the notice period, the bank can go ahead with sale of assets. However, in order to sell, the bank has to serve another 30-day public notice mentioning details of the sale,” says banking and management consultant V.N. Kulkarni.

The lender starts the process of auctioning your property to recover dues if you fail to clear what you owe or respond during the 60-day notice period. However, before doing so, they will have to issue another notice specifying the fair value of the secured asset as assessed by the banks’ valuers, along with other details like reserve price, date and time of auction. “The borrower can object if the property is undervalued. He can justify his objection by conveying any better offer that he may have so that the bank can make a decision,” says Kulkarni. In other words, you can look for prospective buyers on your own and introduce them to the lender if you think that the property can yield a better price.

3. Realise balance proceeds

Do not write off your asset mentally the moment it is repossessed. Keep track of the auction process—it’s easier to do so now as most lenders conduct e-auctions. Lenders are required to refund any balance after recovering the dues, which is a real possibility given that property prices can shoot up beyond the owed amount. “After recovering the dues and all expenses of conducting the auction, the bank has to refund the amount to the borrower as the money belongs to him legitimately,” says Kulkarni.

4. Right to be heard

During the notice period, you can make your representation to the authorised officer and put forth your objections to the repossession notice. “The officer has to reply within seven days, giving valid reasons if he rejects the representation and objections raised by the borrower,” says Kulkarni.

Do not forget that banks are regulated entities that cannot behave like moneylenders while trying to collect dues. Following adverse reports about the conduct of recovery agents, the RBI had pulled up banks over the issue a few years ago. Banks too decided to voluntarily commit to certain best practices as part of their code of commitment to customers.

For one, agents can contact borrowers at a place chosen by the latter. In case they have not specified a place, the agents can visit either the borrower’s residence or place of work. They are required to respect borrowers’ privacy during these visits and ensure civil and decent behaviour. They also cannot land up at unearthly hours. The window available is 7 am to 7 pm, unless the borrower’s working hours necessitate different timings. Agents cannot resort to harassment or intimidation and nor can they humiliate the borrowers or their family members.